SSB - Earnings call transcript Q2 2019

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Operator

Good morning and welcome to the South State Corporation Quarterly Earnings Conference Call. Today's call is being recorded and all participants will be in listen-only mode for the first part of the call. Later we will open the line for questions with the research analyst community.

I will now turn the call over to Jim Mabry, South State Corporation Executive Vice President in charge of Investor Relations and M&A. Please go ahead.

James Mabry

in the calling earnings State for call. conference you today South to Corporation Thank

want listeners results. to contains I beginning, Before remind regarding financial forward-looking that our condition and statements discussion the

cautions Please slide regarding use non-GAAP refer of statements number for the to measures. and regarding two discussion forward-looking

would to Hill, introduce I our who Officer, Executive now the begin like will call. Robert Chief

Robert Hill

we Pollock Good will research more on our observations the second morning. I'll quarter call in the begin conclude analyst quarter this performance. then call will John with with detail, the the and summary comments about from review overall questions community.

Net X.XX% be building or and on XX.XX% marked million XX.X Adjusted to equity. return continues per diluted focus assets average return this that totaled income and net the quarter shareholder $X.XX X.XX% quarter equity. per Our a progress a assets goal. represents tangible return on towards return or on income second a a on long-term diluted XX.X XX.XX% share. $X.XX for million value tangible and chair, was continued represents on This and

investors last ahead. with progress we met and further provide December of into In the insight year, road to our

the longer performance term we part targets. conversation, financial As of articulated

of did have six a on we those a the off timetable While good in targets, to months the put performance us achievement our 'XX not first of start.

expense operating One of good the showed We leverage. adjusted growth considerable the meaningful revenues quarter in highlights demonstrating control. of improvements in and was

our relationships was critical was the business. the growth is that fueled increase Ultimately, average income of customer our asset value. key of and is up in to The shareholder metrics to strength a balance strong, income Interest continue to State. be remain success lines Capital fee competitive very an is grow this the quality funding advantage. And creation perform and remains integrity well to South of sheet ability to impressive, balances all continues company in loan by in levels core and area. of it

remaining share of and remain funding our $XX.XX in the book active and tangible improve continues solid of capital to is deposits. makes last our Directors represents in quality in of from a to with quarter purchases, quarter growth share $X.XX. per $X.XX increase a The levels Despite a an Board non-interest has bearing our cash dividend grew $X.XX This XX.X% year and of from The strong. ago. dividend increase declared

financial will the I now over performance the more to turn quarter. Pollock the detail John call for on for

John Pollok

improvement and morning Robert. My showed management, focus income interest expense on significant operating and in non-interest leverage will this with both quarter capital income our Thank in income comments net while growth. and limiting you, this adjusted increases expense margin, non-interest nice

improvement much five, was growth number can assets portfolio. the net the XX interest short-term in basis income. declined as X.X in margin you earning The points slide see as and interest and investments On million investment the

non-interest on linked margin impact $XXX average shown bearing number this was income six checking in net had the on growth slide also interest Net loans and As million increase positive very quarter, interest income. the quarter. from which benefited a accounts average in X.X%

points in increases to except unchanged certificates were of points Our up rates funds linked deposit accounts as XX increased basis cost quarter for of four deposit. on basis

to this number balance the quarter, of down this as seven the of of impact shows accretion decline. total X.X% income Slide continues interest which to is portfolio

number remaining on and the on can slide eight. portfolio those see the discount You balances

respectively. banking increase income in on quarter mortgage by in had and very income. $X.X million number deposit shown We slide up strong accounts and nine, XXX,XXX management on Fees improvement led wealth this were non-interest as XXX,XXX

income nice also back increase due swap quarter $XXX,XXX with group very the markets activity. capital to to Our in in had a back

expense cost termination excludes good which quarter shares We professional management our a quarter that large were the pension save XX linked the results. part marketing. achieving in was primarily up quarter in annualized, previously initiatives played the expense announced, an cost branch adjusted had $XXX,XXX growth detail. Adjusted expense pretax number non-interest consolidation X.X% holding basis on linked expense fees plan annualized Slide in this $XX and and million

about achieved in quarter; cost incremental saves to track We this million achieve XXXX. the saves remain XX% of X.X on in

in slide first in result X.X a our million quarter in quarter the from to the adjusted on efficiency growth As XX.X% of XX.X% number growth revenue XX. limiting improved ratio this expense shown

the of to share Over give growth most an slide repurchase as cents shown improved year on We number being you slide from $XX.XX X% update share in on value book activity this number XX. during period. Tangible repurchases our despite active XX. a ago, on

to quarter, tangible retired ratio management at standpoint, tangible common second the to shares and have plan. X%. under our equity have XXX,XXX growth the X,XXX,XXX quarter available existing an date for assets capital shares. From we retired activity We repurchase we asset XXX,XXX shares this with a the some as currently combined additional During repurchase

The quarter adjusted leverage and dividend management equity. common this represents GAAP tangible quarter return and operating in of on result These of our earnings XX% by this capital earnings. XX% declared board improvement efforts adjusted a XX.X%

now the summary turn for to will call I some over comments. Robert

Robert Hill

on future improvements optimistic We and and efficient to growth. more systems continue for make prepare balance are make of the in XXXX about us to and processes progress

South XXXX. to economic markets sheet strong months balance of with State Our the activity first six and upon solid the are build of positioned well results a great is underlying a and exhibiting team

to our open prepared like and ask to questions. would concludes call the This the operator for I remarks

Operator

Scouten O'Neill. question comes We will Stephen ahead. for questions. line now open The the Sandler Please go Instructions] [Operator - first from

Stephen Scouten

you guys. Good How doing? morning,

John Pollok

Fine.

Robert Hill

Steve. Hi

Stephen Scouten

sheet this the with of path and over process. more of That's if expect think I be talk in we So I balance growth, for bit some more driving wondering these that the that's of million continue? kind could quarters, that to you borrowings? past kind you? leverage expected undertaking of, leading about the adding a maybe where guess, you little strategy, in should it's behind right XXX curious two And are you're just I'm something what's otherwise, force terms to the

John Pollok

quarter, I a put that, really sheet. the little John, as on we balance Stephen, I'll a to last was leverage talked think we on bit opportunity good of it this start thought is

think a they leverage I little bit at our them, look size, have we more companies when did. than you

blended we're And So XXX look in. kind entry where point. And on of million can trying to it yield with was to with see good for felt dividend. time a we that curve really an go the the costs you was

X%. You see to it's close

increase of sheet. So first say we permanent I'd in a balance feel like that's kind the of all,

asset linked XX% really feel see good so quarter, You up can that. growth; average about it in we earning it's our

traditional that we on in portfolio, see we investment a can some X%. in Steve the over of kind yielded portfolio, buy things You XXX investment did the now as at work we just little and of the right put million

of about the more our think a still we we good still news to future lot cash some of growth. So Obviously, loan optionality And around I that. have is have deployment. good feel fund in the the

option think deployed, to now, going future. we right continue that going where are look this I at we're really to the but to in get we're

Stephen Scouten

in spent and X.X I'm great. some think thinking the expenses, out million hires down from we XQ Is actually I other of could been new quarter-over-quarter run rate then XQ effort to undertaking. Okay, that come move continued be will noted the already believe if see And in something you was the would on investments? guys you've or that that savings annualized where about remaining expense or you

John Pollok

a Stephen, expenses about John again, for is this minute. let me talk

stay And kind long-term I'll goals. think our is back that in day X% investor at of trying to to to go range. I were X% So said we what we

So you kind dig we're can quarter, that I kind doing. we the did expenses, mean it every we'll But do of see one quarter. when think into doesn't you of it what

So money, this look marketing marketing of nCino. at professional our announced we we're with partnership if our you professional our on and spending fees, – line kind

talk You've heard digital roadmap about from. us our

So I there. we investing said, think as we're

the of Stephen that expense some increase range. X% I we in side, these think is mean over good we best try in time where the our to of doesn't on X% view investment to I as expense long the is sort permanent But period that is the implemented. a get think of news stay do there

Stephen Scouten

so change there. Okay, no

John Pollok

Correct.

Stephen Scouten

last And loan for question on Okay, yields. then one little new me is just just great.

X.X% about those I think quarter. do Where said in with Fed those last think were there around the coming you a cut And how you potential quarters? quarter? on this coming

John Pollok

this They a came quarter. down tad

our as more of balanced. residential view does a stuck up. an loan think the get think over were as Today I a of is look give we those the we floaters, as right arm. gives rates you it Stephen, commercial us think we it on I heavy And the book. view X is have opportunity our bit I our half And sheet know, maybe of an more harbored to when to obviously, went floaters kind our us but billion, pretty little really balance build Fed under rates bank. get opportunity at cut you have that is build

billion about got we've in X.X floaters. So

really our You for to capital see group. the can all capital in hit strides markets income starting we're quarter; on our markets

does think was down as that there. say, the does I'd an it opportunity. so really to come give And focus really see. rates It I nice us

just rates now going mortgage On world of all the in are we think the that see need side, mortgage the to of flip to see down that new more on Is on side. things coming the I is it one side kind refinances the

tied So loan at balances Obviously, now are are that, fixed XX below prime rate. equity to book look year when our of you the X%. kind mortgages look at line rate

of see some cylinders fee begin on and But click see So mortgage course, more to really area you, can to churn you fee really can Stephen, going a to from there. side. income all that's our lead

Stephen Scouten

okay. and a for congrats Very on appreciate I quarter. Yeah, sure, thanks, it great guys. helpful,

Robert Hill

Thanks.

Operator

Jennifer next question from with ahead. Please The comes Demba go SunTrust.

Jennifer Demba

morning. Thank you. Good

Robert Hill

Good morning.

Jennifer Demba

over net term, outlook likely your A on the half interest margin in second with the of coming cuts question rate here near year. the

John Pollok

John. Yeah, is Jennifer, this

of managing clearly all of the margin us. is year. been think, to got the I the end difficult today We for

was the kind other rate right to going thought we be lot way. here we Here a and there of go increases of

really of So quarter. deposit place I if you kind right cost a book, side the good – on to this we into of Outside dig our think stability saw think I that's outlook the of funds, CD start. our

tried more between environment. I fixed the first We And CD bit I guess beginning I rates, to in So more comments Stephen, and a we don't get always back little with bit I have to bit manage balanced we lot all, little books. are say, can down. think – little we go like feel to maybe on we this kind try in feel think rates a news. like of my of it a come to floating was a increase towards does that saw good neutral. really

on back for gets ultimately, had PDA growth. see DDA can And margin then us, quarter the the And you non-interest growth. it linked non-interest we to significant

So got rates Jennifer, as to come stay on we focused very down. that

I'll you starting over got year. in XXX conversion area, in really treasury treasury of hit area is their generated this fact, April. And on one They example, our that in completed Our deposits all they've give the systems they million new cylinders. all to

accounts rates all think you it's on be see real measured clearly, they we're at the years, So come are we be the down. to to stability, some focused have and we'll down, least XX stay deposit got I funding measured calls. going to know that on on We've got our been us But come us; very side. so checking going with to XX funding, good as

Jennifer Demba

compression expecting cuts rate on you're keep margin funding? these focusing the modest you'll that So some with

John Pollok

see income. some, you're the on more think flip that of see you'll fee also think but going to I I side

the you're fee take income just side. So more going on to mortgage, see

said to book mortgage that low income. when produce need don't we've And amount. a want down, fee you When on always rates at what coming point, a fair are so more are you rates is to very grow

So correlated, then on in nice and we of the the had. not some it's it can our especially side quarter I see the margin, but income markets capital think this mortgage in quarter, totally you that offset that fee

Jennifer Demba

further M&A in Okay, this question. point? What's a at separate interest your

Robert Hill

I I Robert. where start overall let strategically few with strategically is, This see kind then how the where I just plays of into just guess, things. we and that – a think is me maybe company go

treasury billion I really very deposit are book. customers very soundness we're balance granular, pretty our the so as position is almost where year, we're probably mentioned, is got is credit. base, $XX kicking for extraordinary. First to grow is the XX,XXX pace lot credit optionality perspective. we on from there sheet and really a recovery net a stack John solid, in, on year new of from this I It in capital a common, all perspective, a mean, really, mean,

is really the blocks December, in good we one just years, building company, two overall the the then, of were focus. place, explained the and investments soundness you manager, the pieces our on and technology, And as markets, number transformation, investor right the we're you which put made And headway last capital in look at about productivity. strategically getting know, digital also we've being feel then improved place. we So in on, meeting, the just our commercial platform but in treasury, expense tremendous

So we feeling for like really those path. a found pay is good ways investments that to that's and

numbers But at still see talents So as our that was think momentum we lot customers us productivity the the quality is teams, in, if foremost area not of to our first really a year quarter. and that I then every And the And good company. net think growth it feels kind our hold. good. ago, the that we're we spotty. you goes of And it levels, what's company really this feels pipelines, in have, of loan kind the of future momentum really look and forward what Obviously, want. the a the of a the bringing of for you that all is I

value is I open So a our bank. organic and build you better my long place really great our create always that foundation to great been we But saying feel about And much we shareholders the than path. want in for is we're point time. now to know, in as mean, a it's in a

And on there if whatever our pursue strong got are are that sure the But consider opportunities that, making from in would been in a really to certainly So past. we've changed do really to clearly we've always best. had options that's foundation we focus as we have. the just is primary where that place

than while. I think what been has quite foundation our changed in has is a just is stronger

Jennifer Demba

Okay, thank you.

Operator

The with next Stafford go Please Tyler ahead. question Stephens. comes from

Tyler Stafford

income. quarter? and Hey, had morning, production want this Obviously, And Can was well. quarter you good to thanks that then value again there well. to you was taking curious sale I on your this about impact fee on talk question. margin quarter fair relative as as just mortgage the for guys in last a fee this results What this start quarter. nice if

John Pollok

and we From exactly Stephen, this is on in disclose held fees, margin but held is well, John. a there what perspective margin well. there in don't pretty our very

One was kind bottom of of and the rates in right. going, the rates unique kind a mortgage things treasuries the on really of XX hit so the kept movement of mortgage year and

kind didn't couple you the helped quarters battle. side, really MSR. From been of at that sale it's when a that last make on quarter MSR the So Last it. gain on look really in the whole a money lot of

our half This out got quarter, that. of in a We MSR basis. quarterly X asset we generated fees about about of million on

side, starting seeing added build. MSR. to growth We to mortgage it's that in income X% getting asset, on think stability stream. we're more I the so so the We're And in

we could knows. on rates just I stability in think the four, go a does really bottom where I there the the question if feel about year? we rates, little really XX the asset. So mortgage a nobody kind Clearly that's good to hold of are MSR get below

generate kind like like to our our in just Now sheet. earlier business. use in production also side, on as secondary the market I to view we'd is, mentioned on if of balance But you is call, flip to the the go we mortgage over the

sheet. going be our market. going So fees as there's in mortgage to to about create the on see, to you're It's portfolio more pressure more to secondary going the grow balance just – talked growth Robert

good side. you So we how really the mortgage want on the feel book your momentum fee ultimately, about But work. this is to

secondary refinanced down a you and churn earlier, talked go – refinance hybrid as go get second into rates in As have up we get new arms, product. the the that they'll and to arm about pick want or either market those

Tyler Stafford

Okay, thanks, John. that. Appreciate

could on just tomorrow, margin if up we think July cuts for a if terms just the up just about in size one? us you pressure following arrange cut do do Jenny's curious with Just earlier of if question, get get to

John Pollok

much wouldn't look XX% average kind of to look would – know they it if But down, cut. betas our how typically, you I exactly be. come Well, when the like, XX% of at rates

the it really got So kind think But clearly on comes also We this of think some pressure we as more loan depends on mean, bucket. side, went leverage should our funding pipelines side the are But out there strategy, as Robert would be mentioned, good. I and the on liquidity. did you down.

really got yield the of curve. we've think entry I because point great a

so from the And pressure, And what's obviously, think we are about growth you view as there. also I got Tyler, side? a on what the going you to sea as our perspective help think think consider that earlier, the happen to I is then – mentioned

Tyler Stafford

Sure, sure.

Okay, thanks.

at, looking achieve profitability leverage ROA to there's South ROTC. that State corresponding we if term that obviously think just strategy curious helping XX% I ROA Just longer just target the is should just and guess, a XX% about. I'm

John Pollok

that a Nothing I there, want it, higher we out clearly put get but ROA.

kind kind view time I talked earlier up was some. about of permanently the our balance we think size sheet over taking of

we we average linked assets grew did those earning XX% quarter those so transactions. And and

you're over into is get So did I rather we going the yields million see growth. I shift loan to in the of instead but portfolio, think that, XXX putting would time, our view that X% much investment over on

that's going a think I lot. to help us

Tyler Stafford

the the release buyback. $X.XX lastly about value John quarter. by due release impacted by penny stated share was talked to EPS book one positively the impacted And tangible later earnings the then for and me. how buyback Okay the this then just

on you your was hop just book associated just that So wondering out. and is value about I'll kind dilution think and back repurchases? back repurchase how I'm and earn TBV of what Thanks with earn

John Pollok

tangible Well, it's assets books, an marked, earn from does on for the But the what put we purchase M&A we're hey, I of clearly perspective, a able think that book from what we've a been to reside on back if do these you're bullish that thinking value time shareholder. are assets frame. assets know, I traditionally share on we've longer very it

well. period very, little M&A, – you the it clearly in of So bit but time longer very that than you're investing a something all know

Operator

Marinac Instructions] [Operator Christopher comes ahead. next Please from The question go Scott. Janney with Montgomery

Christopher Marinac

the year-over-year. Is Want staffing terms Thanks. possibly behind changed percentage change numbers Or that look either absolute you? bulk the morning. just Good next to in the FTE or year? shift in is already at of that similar in the numbers

John Pollok

continuing that this look Chris, To run that. we same the thing that Yeah, levels, I to reduction at would FTE say business, we be lines a how just of the is constant we're staffing don't next John. that's our know year, do.

next We year. are approach our beginning for season to budget

So where more to to things way begin look make a want we'll is at to we efficient. invest, there

be it to So will at. continue something look we will

Robert Hill

That's consistent on just for as done same Chris, to eight added obviously The add pretty Robert. add to revenue as normal to productivity on, kind continue We the number side QX We kind efficiency have just believe, we in is side. producers. just a been continuing is QX, is on XX the in always about of kind this that's add quarters. I a the of and few us process. last revenue of talking

Christopher Marinac

either change your look does appreciate explanation. what footprint? quarters. in That's broader book us but the I had at credit valuation how you progress kind then curious What on back step the looked that had in is of seems about and Thanks on that in of of tells or that that Just as success great. you, I'm in the tell we footprint how you've it. acquired and portfolio of specifically? on And most and you a for revaluations sort for it lot the general sort picture, health that your your when

Robert Hill

in being downturn slower credit be, at in some And credit And soundness in starts. crisis you it our want now but or company churn in loan just the where the what really and really all I think not book are really and point a we were financial are the net the you – net other good. portion day little is and growth our times got robust where change. of productivity loan cycle talking culture quite the the kind we the being of to growth about philosophy it Well, times, recession doesn't like where

stick it's of tested So to time cycle kind tested, and of kind we it.

a I it what ultimately, credit good have we think So culture. says really

well, I perform growth right markets were in of aren't that we're think that I businesses pick tending capitalized customers, both top markets we're what underwrite are on well and well. very – both quality or We're to We it's we think but and now in over selective. leveraged. we rural seeing that extraordinarily

certainly some market witnessed of risk in our or markets. in that be one low. Businesses portfolio, over seem industry to of reflection is and two. last very to Unemployment of the terms You've in of profitable. amount manageable think the any quarter not the seen in are that. But be The I our seems credit offs rates loan we've in our

Christopher Marinac

quarters. that's And you'll I to that have Great, potential future continue revaluations helpful. in presume

it? You just time. the quarter that think right about it to take at Is way a one

John Pollok

quarters CECL, John. before two Chris, more we this right. Obviously, got is

really So then that of revaluation really see yes, would you think changes, the quarters, over I next right. couple

world into to begins get the CECL change. really we As it

few And so year a at us, CECL, we've about history looked out gone think caveats. for loss I XX with of and as kind our

we a from only points moving on of XX pieces Obviously, piece XX that quantitative got layer about look at the so look think today. years top kind you back where statement. statement are income two you a really little is to over you in reevaluation whole of the over pieces, get of there's reserve. about our past of how the on qualitative to And we comes the income total the And it kind loan Chris, portfolio. perspective, in is But when of basis

and big acquired credit $X the the loan what, it to side guess the you'll about that loan accretion really a back a quarter [ph] come – and and in – came notice had had we million [indiscernible]. really in accretion when Well, a that through the accretion come kind a reserve. First comes back of would nice from reserve through, release of big, paired through of that come more on all,

basically The that's other million we've we paid for you done, those and when each as charge is income offs offs, it through there in was as X.X the impaired acquired so now go in against X.X come traditionally And It a million, we that XX know, non our piece non at look have Well, credit have up really charge what credit would acquired through pushed points. the offs. in you basis book statement. reserve had charge quarter. about wouldn't we've

you pools, breaking is years think throw over know, was you're weighted in say life then reason the accretion acquired as credit pools, back going that loans of loan income up I on going to and the RCBT you than out we're average actually you're the And come in in pools stretched come in. finally, XX to statement. impaired when is our the So that transaction have the see we there pieces payouts pools from those increase ago I those excess is those our bucket, accretion on more through

of think quarters more So we a into then I XXXX. are, to as see lot you're a of going we couple get changes where

Christopher Marinac

color additional really the appreciate for it. but you I Thank John. great here, sounds you, Got

Operator

Please with The NAB ahead. next Nancy from research. comes go question bush

Nancy Bush

How are Good you? morning, gentlemen.

John Pollok

morning. Good

Nancy Bush

want this. that you And as question activity capital XXX,XXX in platform When the ago, think you there build the revenues and that that this your got I changed of you couple mind to business? this with that whether the I'm swap this behind you Park if platform. with wondering that I a the business. you can want a you've further just mentioned primarily And capital us go results received And further some is if Sterling. markets update ambivalence quarter have reason asked you how be from You about about acquired how a go being much I'm to or seemed quarters referenced markets to assuming about out of

Robert Hill

if wrong that this were of the Park beginning. that excited very and marches capital to perception. the We've is that we I'd perception Nancy, Yeah, part treasury. been it's committed was Robert. just say Sterling about – from We're the really

that through you time. execute a starting you to things work were those we you're last fruits had that over the year. to the and it on kind efforts how Now, see took of some platform. But how over it bigger Those certainly integrate of

he's a commercial who across just we've but as leads our commercial really a in committed Group, our the business We our I and we're number It pipeline our footprint, it of solidify really compete the reasons like need fully lot and helps think it We to but robust value us, is interest value relationships just there The it risk first So Royster, our one, is Capital talented, helps foremost, to it us Randy we the very is adds well. Markets helped number for we customers' like business. us marketplace. it. really overall. like to team, started. our of customers, pipeline the rate, adds There's management, as

far feel still is but has of million years. that inside lot the I a business things but couple there, so starting XXX over the in just So like this line our deposits last traction in but as to fully company, of so we've new mentioned mature new treasury. year. the of invested committed, relationships, John progress, XXX same

that. to starting results of some of we're the quarter, really This see

Nancy Bush

and place that. that's the been southeast and taking as on I of in banking would talk conference mean, to area add this businesses, about of or into a people Charlotte environment an of as the there's indeed just lot ask turmoil the I on in the calls new to second quarter of some in result particularly turmoil. add a to markets able markets the whether some areas you're maybe capital capital go to

Robert Hill

think think commercial, – several all mortgage private lines, XX they're added market, QX areas looking, middle that I we consumer, across in people investment. I really business – two that we're

both digital And to the company, QX growth speaks in terms digital market think markets in changes kind the in I some XX%. of channels, our you of overall of also capital in the and turmoil But in look QX our an for customers. X% transformation and doing we're the the what this till digital opportunity people market, our transformation. the deposits is but came clearly at through of of

platform I more our – was ago it our footprint and is think both we're good getting months as commercial and XX traction. consumer than are commercial So robust is much

Nancy Bush

Okay, thank you.

Operator

no are further it there Gentlemen, appears in questions the queue.

John Pollok

time Thanks, everyone for your today.

participating on Forum be Bank September Little Rock, again Arkansas the to the in XX. to you in forward reporting We Stephens soon. will look We beginning

Operator

is for conference today's now attending Thank you The presentation. concluded.

You disconnect may now

SouthState (SSB) 30 Jul 192019 Q2 Earnings call transcript